Signs of deflation in the economy – Chrysler’s main initiative now is to cut $1,000 in costs for each vehicle produced
Fred Day
Oct. 20, 2006

That is the kind of signal economists wait to call for change of tune from stagflation to deflation. Chrysler’s main initiative now is to cut $1,000 in costs for each vehicle produced. But all the factors that prompted the car manufacturer to focus on manufacturing cost cutting is also contributing in the economy to start the self fueling deflation.

The auto sector is weak. The weakness finally spilled over into cost cutting initiative. Sooner or later GM, Ford and eventually Toyota and Honda will join the band wagon for cutting cost too.

The economy is so weak internally with auto and residential real estate sector that it is forcing stagflation to transform into stagflation. The economy is also in the process of confusing the Fed. The apparent tight labor market within the framework of underemployment is forcing the Fed to raise the rates three more times in 2007. That will finally tip the needle on the deflation side, as economy will start its negative growth cycle along with steep deflation and inverted yield curve.

Signs of deflation in the economy – Chrysler’s main initiative now is to cut $1,000 in costs for each vehicle produced
Fred Day
The economy is so weak internally with auto and residential real estate sector that it is forcing stagflation to transform into stagflation.
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Like the NY Empire State Index, the Philadelphia Fed survey data manifests the robust growth of US economy
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Market expected NY Empire State Index to come at 13.0 from prior month’s 13.8. It came out on Monday at 22.9 surprising every one. Tomorrow around 12 Noon Philadelphia Fed survey data is set to surprise all. It will be equally robust.
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